EXHIBIT 10.8
Supplemental Agreement No. 2
to
Purchase Agreement No. 2060
between
The Boeing Company
and
Continental Airlines, Inc.
Relating to Boeing Model 767-400ER Aircraft
THIS SUPPLEMENTAL AGREEMENT, entered into as of June
8, 1999, by and between THE BOEING COMPANY, a Delaware corporation
with its principal office in Seattle, Washington, (Boeing) and
CONTINENTAL AIRLINES, INC., a Delaware corporation with its
principal office in Houston, Texas (Customer);
WHEREAS, the parties hereto entered into Purchase Agreement
No. 2060 dated October 10, 1997, (the Purchase Agreement) relating
to Boeing Model 767-400ER aircraft, (Aircraft); and
WHEREAS, Boeing and Customer have mutually agreed to
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]; and
WHEREAS, Boeing and Customer wish to update the Agreement to
reflect the finalized configuration of the Aircraft; and
WHEREAS, Boeing and Customer wish to update the Agreement to
reflect the Installation of Cabin Systems Equipment; and
WHEREAS, Boeing and Customer have mutually agreed to amend the
Purchase Agreement to incorporate the effect of these and certain
other changes;
NOW THEREFORE, in consideration of the mutual covenants herein
contained, the parties agree to amend the Purchase Agreement as
follows:
1. Table of Contents:
Remove and replace, in its entirety, the "Table of Contents",
with the Table of Contents attached hereto, to reflect the changes
made by this Supplemental Agreement No. 2.
2. Table 1:
Remove and replace, in its entirety, "Table 1, Aircraft
Delivery, Description, Price and Advance Payments" with the revised
"Table 1, Aircraft Delivery, Description, Price and Advance
Payments", attached hereto, to reflect the revised delivery
schedule for the Aircraft and certain other changes.
3. Exhibits:
Exhibit A is deleted in its entirety and the revised Exhibit
A (attached hereto) is substituted in lieu thereof.
4. Letter Agreements:
Add Letter Agreement 6-1162-JMG-165, "Installation of Cabin
Systems Equipment" to incorporate the agreement regarding Cabin
Systems Equipment.
5. Payment of Additional Advance Payments:
Within three (3) business days after execution of this
Supplemental Agreement, Buyer shall transfer to Boeing's account at
Chase Manhattan Bank, New York, N.Y., the sum of [CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT], which sum represents advance payments then due with
respect the changes to the Advanced Payment Base Price.
The Purchase Agreement will be deemed to be supplemented to the
extent herein provided as of the date hereof and as so supplemented
will continue in full force and effect.
EXECUTED IN DUPLICATE as of the day and year first written above.
THE BOEING COMPANY CONTINENTAL AIRLINES, INC.
By: /s/ J. A. McGarvey By: /s/ Brian Davis
Its: Attorney-In-Fact Its: Vice President________
TABLE OF CONTENTS
ARTICLES Revised By:
1. Quantity, Model and Description
2. Delivery Schedule
3. Price
4. Payment
5. Miscellaneous
TABLE
1. Aircraft Information Table SA No. 2
EXHIBIT
A. Aircraft Configuration SA No. 2
B. Aircraft Delivery Requirements and Responsibilities
SUPPLEMENTAL EXHIBITS
BFE1. BFE Variables
CS1. Customer Support Variables
EE1. Engine Escalation/Engine Warranty and Patent
Indemnity
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT]
TABLE OF CONTENTS
LETTER AGREEMENTS Revised By:
2060-1 not used
2060-2 Demonstration Flights
2060-3 Spares Initial Provisioning
2060-4 Flight Crew Training Spares
2060-5 Escalation Sharing
6-1162-JMG-165 Installation of Cabin Systems SA No. 2
Equipment
TABLE OF CONTENTS
CONFIDENTIAL LETTER AGREEMENTS Revised By:
6-1161-GOC-084 [CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT]
6-1162-GOC-085 [CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT]
6-1162-GOC-086 Special Matters
SUPPLEMENTAL AGREEMENTS Dated as of:
Supplemental Agreement No. 1 December 18, 1997
Supplemental Agreement No. 2 June 8, 1999
Table 1
to Purchase Agreement No. 2060
Aircraft Delivery, Description, Price and Advance Payments
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
AIRCRAFT CONFIGURATION
between
THE BOEING COMPANY
and
CONTINENTAL AIRLINES, INC.
Exhibit A to Purchase Agreement Number 2060
AIRCRAFT CONFIGURATION
Dated June 1999
relating to
BOEING MODEL 767-400ER AIRCRAFT
The Detail Specification is Boeing Detail Specification
D019T001-CAL-64E1 dated as of even date herewith. Such Detail
Specification will be comprised of Boeing Configuration
Specification D019T003, revision A, dated March 13, 1997 as amended
to incorporate the Options listed below, including the effects on
Manufacturer's Empty Weight (MEW) and Operating Empty Weight (OEW).
Such Options are set forth in Boeing Document D019TCR1-CAL-64E1.
As soon as practicable, Boeing will furnish to Buyer copies of the
Detail Specification, which copies will reflect such Options. The
Aircraft Basic Price reflects and includes all effects of such
Options, except such Aircraft Basic Price does not include the
price effects of any Buyer Furnished Equipment or Seller Purchased
Equipment.
Exhibit A to
Purchase Agreement No. 2060
Page 2
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
June 8, 1999
6-1162-JMG-165
Continental Airlines, Inc.
1600 Smith Street
Houston, TX 77002
Subject: Installation of Cabin Systems Equipment
Reference: Purchase Agreement No. 2060 (the Purchase Agreement)
between The Boeing Company (Boeing) and Continental
Airlines, Inc. (Customer) relating to Model 767-400
aircraft (the Aircraft)
Ladies and Gentlemen:
This Letter Agreement amends and supplements the Purchase
Agreement. All terms used but not defined in this Letter Agreement
have the same meaning as in the Purchase Agreement.
Customer has requested that Boeing install in the Aircraft the
inflight entertainment and cabin communications systems (IFE/CCS)
described in Attachment A to this Letter Agreement.
Because of the complexity of the IFE/CCS, special attention and
additional resources will be required during the development,
integration, certification, and manufacture of the Aircraft to
achieve proper operation of the IFE/CCS at the time of delivery of
the Aircraft. To assist Customer, Boeing will perform the
functions of project manager (the Project Manager) as set forth in
Attachment B, according to the requirement of Attachment C.
1. Responsibilities.
1.1 Customer will:
1.1.1 Provide Customer's IFE/CCS system requirements
to Boeing;
1.1.2 Select the IFE/CCS suppliers (Suppliers) from
among those suppliers identified in the Change Requests listed in
Attachment A to this Letter Agreement as otherwise formally offered
by Boeing.
1.1.3 Promptly after selecting Suppliers, participate
with Boeing in meetings with Suppliers to ensure that Supplier's
functional system specifications meet Customer's and Boeing's
respective requirements. Such functional systems specifications
define functionality to which Boeing will test prior to delivery
but is not a guarantee of functionality at delivery;
1.1.4 Select Supplier part numbers;
1.1.5 Negotiate and obtain agreements on product
assurance, product support following Aircraft delivery (including
spares support), and any other special business arrangements
directly with Suppliers;
1.1.6 Provide pricing information for part numbers
selected above to Boeing by a mutually selected date;
1.1.7 Negotiate and obtain agreements with any
required service providers; and
1.1.8 Include in Customer's contract with any seat
supplier a condition obligating such seat supplier to enter into
and comply with a Boeing approved bonded stores agreement. This
bonded stores agreement will set forth the procedures concerning
the use, handling and storage for the Boeing owned IFE/CCS
equipment during the time such equipment is under the seat
supplier's control.
1.1.9 Authorize Boeing to obtain production IFE/CCS
spares for test and or rejection replacement as follows:
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT] overage for in-seat LCD monitors, in-seat
cables, handsets, cord reels, and remote jacks; [CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT] overage for seat boxes; and, one each of the head-end
equipment. Unused parts will be returned to the Customer with the
aircraft delivery and any parts returned to the supplier for repair
will be returned to the Customer, at no further cost, after
aircraft delivery.
1.2 Boeing will:
1.2.1 Perform the Project Manager functions stated in
Attachment B;
1.2.2 Provide Aircraft interface requirements to
Suppliers;
1.2.3 Assist Suppliers in the development of their
IFE/CCS system specifications and approve such specifications;
1.2.4 Negotiate terms and conditions (except for
price, product assurance, product support following Aircraft
delivery and any other special business arrangements) and enter
into contracts with Suppliers and manage such contracts for the
IFE/CCS;
1.2.5 Coordinate the resolution of technical issues
with Suppliers;
1.2.6 Ensure that at time of Aircraft delivery the
IFE/CCS configuration meets the requirements of the Options
contained in Attachment A to this Letter Agreement as such
Attachment A may be amended from time to time; and
1.2.7 Obtain FAA certification of the Aircraft with
the IFE/CCS installed therein.
2. Software.
IFE/CCS systems may contain software of the following two
types.
2.1 Systems Software. The software required to operate and
certify the IFE/CCS systems on the Aircraft is the Systems Software
and is part of the IFE/CCS.
2.2 Customer's Software. The software accessible to the
Aircraft passengers which controls Customer's specified optional
features is Customer's Software and is not part of the IFE/CCS.
2.2.1 Customer is solely responsible for specifying
Customer's Software functional and performance requirements and
ensuring that Customer's Software meets such requirements.
Customer and Customer's Software supplier will have total
responsibility for the writing, certification, modification,
revision, or correction of any of Customer's Software. Boeing will
not perform the functions and obligations described in paragraph
1.2 above, nor the Project Manager's functions described in
Attachment B, for Customer's Software.
2.2.2 The omission of any Customer's Software or the
lack of any functionality of Customer's Software will not be a
valid condition for Customer's rejection of the Aircraft at the
time of Aircraft delivery.
2.2.3 Boeing has no obligation to approve any
documentation to support Customer's Software certification. Boeing
will only review and operate Customer's Software if in Boeing's
reasonable opinion such review and operation is necessary to
certify the IFE/CCS system on the Aircraft.
2.2.4 Boeing will not be responsible for obtaining FAA
certification for Customer's Software.
3. Changes.
3.1 After Boeing and Supplier have entered into a contract
for the purchase of the IFE/CCS, changes to such contract may only
be made by Boeing. Any Customer request for changes to the IFE/CCS
specification after the Boeing/Supplier contract has been signed
must be made in writing directly to Boeing. Boeing shall respond
to such request by Customer in a timely manner. If such change is
technically feasible and Boeing has the resources and time to
incorporate such change, then Boeing shall negotiate with the
Supplier to incorporate such change into the contract for the
IFE/CCS. Any Supplier price increase resulting from such a change
will be negotiated between Customer and Supplier.
3.2 Boeing and Customer recognize that the developmental
nature of the IFE/CCS may require changes to the IFE/CCS or the
Aircraft in order to ensure (i) compatibility of the IFE/CCS with
the Aircraft and all other Aircraft systems, and (ii) FAA
certification of the Aircraft with the IFE/CCS installed therein.
In such event Boeing will notify Customer and recommend to Customer
the most practical means for incorporating any such change. If
within 15 days after such notification Customer and Boeing through
negotiations cannot mutually agree on the incorporation of any such
change or alternate course of action, then the remedies available
to Boeing in Paragraph 6 shall apply.
3.3 The incorporation into the Aircraft of any mutually
agreed change to the IFE/CCS may result in Boeing adjusting the
price of the Change Request contained in Attachment A to this
Letter Agreement.
3.4 Boeing's obligation to obtain FAA certification of the
Aircraft with the IFE/CCS installed is limited to the IFE/CCS as
described in Attachment A, as Attachment A may be amended from time
to time.
4. Supplier Defaults.
Boeing shall notify Customer in a timely manner in the event
of a default by a Supplier under the Supplier's contract with
Boeing. Within 15 days of Customer's receipt of such notification,
Boeing and Customer shall agree through negotiations on an
alternative Supplier or other course of action. If Boeing and
Customer are unable to agree on an alternative Supplier or course
of action within such time, the remedies available to Boeing in
Paragraph 6 shall apply.
5. Exhibits B and C to the AGTA.
IFE/CCS is deemed to be BFE for the purposes of Exhibit B,
Customer Support Document, and Exhibit C, the Product Assurance
Document, of the AGTA.
6. Boeing's Remedies.
If Customer does not comply with any of its obligations set
forth herein, Boeing may:
6.1 delay delivery of the Aircraft pursuant to the
provisions of Article 7, Excusable Delay, of the AGTA; or
6.2 deliver the Aircraft without part or all of the IFE/CCS
installed, or with part or all of the IFE/CCS inoperative.
6.3 increase the Aircraft Price by the amount of Boeing's
additional costs attributable to such noncompliance.
7. Advance Payments.
7.1 Estimated Price for the IFE/CCS. An estimated price for
the IFE/CCS purchased by Boeing will be included in the Aircraft
Advance Payment Base Price to establish the advance payments for
each Aircraft. The estimated price for the Boeing purchased
IFE/CCS installed on each Aircraft by Change Requests listed in
Attachment A is [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT] U.S. dollars expressed in 1995 dollars.
7.2 Aircraft Price. The Aircraft Price will include the
actual IFE/CCS prices and any associated transportation costs
charged Boeing by Suppliers.
8. Customer's Indemnification of Boeing.
Customer will indemnify and hold harmless Boeing from and
against all claims and liabilities, including costs and expenses
(including attorneys' fees) incident thereto or incident to
successfully establishing the right to indemnification, for injury
to or death of any person or persons, including employees of
Customer but not employees of Boeing, or for loss of or damage to
any property, including Aircraft, arising out of or in any way
connected with any nonconformance or defect in any IFE/CCS, and
whether or not arising in tort or occasioned in whole or in part by
the negligence of Boeing. This indemnity will not apply with
respect to any nonconformance or defect caused solely by Boeing's
installation of the IFE/CCS.
9. Title and Risk of Loss.
Title and risk of loss of IFE/CCS equipment will remain with Boeing
until the Aircraft title is transferred to Customer.
If the foregoing correctly sets forth your understanding of our
agreement with respect to the matters treated above, please
indicate your acceptance and approval below.
Very truly yours,
THE BOEING COMPANY
By /s/ J. A. McGarvey
Its Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date: June 8,1999
CONTINENTAL AIRLINES, INC.
By /s/ Brian Davis
Its Vice President
Attachment A
Cabin Systems Equipment
The following Options describe the items of equipment that
under the terms and conditions of this Letter Agreement are
considered to be IFE/CCS. Final configuration will be based on
Customer acceptance of any or all options listed below.
Option Numbers and Titles
2318A045B85 Cabin Telecommunication - Cabin Telecommunication Unit
- - Matsushita
2331-000614 Passenger Address - Passenger Address (PA) System -
Rockwell Collins - Dual Class
2331A045B16 Passenger Address - Pre-Recorded Announcement And
Boarding Music System M - Matsushita
2332-002405 Video Entertainment - Interactive In-Seat Video System
- - Partial Provisions - Forward Cabin
2332-002406 Video Entertainment - Interactive In-Seat Video System
- - Partial Provisions - Mid Cabin
2332-002408 Video Entertainment - Interactive In-Seat Video System
- - Partial Provisions - Aft. Cabin
2332-002423 Video Entertainment - Overhead Video System - Partial
Provisions - Video Distribution Unit (VDU) Based Systems
2332-002717 Video Entertainment - Passenger Flight Information
System (PFIS) - Airshow 420
2332A045B14 Video Entertainment - In-Seat Video System - Matsushita
- - With Matsushita 16 Channel CD Player
2332A045B83 Video Entertainment - Video Entertainment - Overhead
Video System - Matsushita
2454A237A06 Electrical Power Outlet For Personal Computer -
Installation - Business Class And 8 Rows Of Economy Class Passenger
Seats
Attachment B
Project Manager
This Attachment B describes the functions that Boeing will perform as Project Manager to
support (i) the development and integration of the IFE/CCS and (ii) the FAA certification of
the IFE/CCS when installed on the Aircraft.
1. Project Management
Boeing will perform the following functions for the IFE/CCS. Boeing will have authority
to make day-to-day management decisions, and decisions on technical details which in Boeing's
reasonable opinion do not significantly affect form, fit, function, cost or aesthetics.
Boeing will be responsible for:
A. Managing the development of all program schedules;
B. Evaluating and approving Supplier's program management and developmental plans;
C. Defining program metrics and status requirements;
D. Scheduling and conducting program status reviews;
E. Scheduling and conducting design and schedule reviews with Customer and Suppliers;
F. Monitoring compliance with schedules;
G. Evaluating and approving any recovery plans or plan revisions which may be
required of either Suppliers or Customer;
H. Leading the development of a joint IFE/CCS project management plan (the Program
Plan) and;
I. Managing the joint development of the System Specification
2. System Integration
Boeing's performance as Project Manager will include the functions of systems integrator
(Systems Integrator). As Systems Integrator Boeing will perform the following functions:
A. As required, assist Suppliers in defining their system specifications for the
IFE/CCS, approve such specifications and develop an overall system functional
specification;
B. Coordinate Boeing, Customer and Supplier teams to ensure sufficient Supplier and
Supplier sub system testing and an overall cabin system acceptance test are
included in the Program Plan; and
C. Organize and conduct technical coordination meetings with Customer and Suppliers
to review responsibilities, functionality, Aircraft installation requirements and
overall program schedule, direction and progress.
3. Seat Integration
A. Boeing will coordinate the interface requirements between seat suppliers and
Suppliers. Interface requirements are defined in Boeing Document Nos. D6-36230,
"Passenger Seat Design and Installation"; D6-36238, "Passenger Seat Structural
Design and Interface Criteria"; D222W232, "Seat Wiring and Control Requirements";
and D222W013-4, "Seat Assembly Functional Test Plan".
B. The Suppliers will be required to coordinate integration testing and provide seat
assembly functional test procedures for seat electronic parts to seat suppliers
and Boeing, as determined by Boeing.
C. The Suppliers will assist the seat suppliers in the preparation of seat assembly
functional test plans.
Attachment C
Continental Airlines 767-400
Critical Impact Events
The Contingency Plan is the alternate course of action which will be implemented if the
critical decision date is not met or other course of action is not agreed to by Boeing and
Buyer. The critical impact events listed below are milestones which must be met by IFE and
BFE Seat Suppliers to achieve the in-sequence installation of the IFE. The Required Due
Dates in such tables are the dates on which Boeing begins to incur disruption costs. The
Critical Decision Dates are the dates after which the critical impact event cannot be
accomplished to maintain the delivery schedule and/or full system testing, certification or
installation. A meeting to discuss a recovery plan cost impact and/or an alternate course
of action will be held within one week of knowledge of delinquency or impending delinquency.
Event Required Critical Contingency Plan
Due Date Decision
Date
Approvable seat dynamic test plan [CONFIDENTIAL MATERIAL Assess out-of -sequence
submitted OMITTED AND FILED charges
SEPARATELY WITH THE
Abuse load test hardware on-dock at SECURITIES AND Assess out-of -sequence
seat supplier EXCHANGE COMMISSION charges
PURSUANT TO A REQUEST
Dynamic test hardware on-dock at FOR CONFIDENTIAL Assess out-of -sequence
seat supplier TREATMENT] charges
Cable routing data from seat Suppliers IFE/Passenger Service
to Boeing and Matsushita System - inoperative at
Delivery
Seat dynamic test conduct Deliver airplane without
seats - installed (zero
passenger) or assess
out-of sequence charges
Attachment C (continued)
Continental Airlines 767-400
Critical Impact Events
Event Required Critical Contingency Plan
Due Date Decision
Date
Seat abuse load test plan approval [CONFIDENTIAL MATERIAL Assess out-of-sequence
OMITTED AND FILED charges
SEPARATELY WITH THE
Seat abuse load test conduct SECURITIES AND Deliver airplane without
EXCHANGE COMMISSION seats installed (zero
PURSUANT TO A REQUEST passenger) or assess
FOR CONFIDENTIAL out-of sequence charges
TREATMENT]
Seat dynamic test report submittal Assess out-of-sequence
charges
Seat abuse load test report submittal Assess out-of-sequence
charges
IFE production hardware on-dock
at seat supplier
Seats on-dock (complete and in-seat Deliver airplane without
IFE hardware functionality tested) seats installed (zero
at Boeing passenger) or assess
additional out-of-sequence
charges
Attachment C (continued)
Continental Airlines 767-400
Critical Impact Events
Event Required Critical Contingency Plan
Due Date Decision
Date
VCC structural substantiation plan to [CONFIDENTIAL MATERIAL Assess out-of-sequence
Boeing OMITTED AND FILED charges
SEPARATELY WITH THE
VCC general arrangement drawings to SECURITIES AND Assess out-of-sequence
Boeing EXCHANGE COMMISSION charges
PURSUANT TO A REQUEST
Initial interface loads analysis to FOR CONFIDENTIAL Assess out-of-sequence
Boeing TREATMENT] charges
VCC approvable drawings submitted Assess out-of-sequence
charges
Final interface loads analysis submittal Assess out-of-sequence
charges or no VCC installed
at delivery and IFE
inoperative
VCC stress analysis submittal Assess out-of-sequence
charges or no VCC installed
at delivery and IFE
inoperative
VCC FAI Assess out-of-sequence
charges
VCC on dock at Boeing Assess additional out-of-
sequence charges or deliver
airplane without VCC and IFE
inoperative